01 March 2006
North Korea Narcotics Involvement Termed "Likely but Not Certain"
Pyongyang uses network of front companies to launder proceeds, U.S. report says
Washington -- North Korea most likely sponsored narcotics production and trafficking in 2005, although there were no public reports of incidents with clear, demonstrable links to the Pyongyang government, according to a State Department report released March 1.
The International Narcotics Control and Strategy Report 2006 (INCSR) noted that North Koreans have been apprehended trafficking in narcotics and engaging in other illicit activities for decades.
Given developments during 2005 that linked the North Korean government to "other forms of state-directed criminality," the report says, the State Department reaffirmed its opinion that "it is likely, but not certain, that the North Korean government sponsors criminal activities, including narcotics production and trafficking, in order to earn foreign currency for the state and its leaders."
The report found "substantial evidence" that North Korean government entities and officials have laundered proceeds of illegal activities such as narcotics trafficking and counterfeiting through a network of front companies that use overseas financial institutions.
In September 2005, the Department of the Treasury designated Banco Delta Asia SARL in Macau as a "primary money laundering concern," asserting that the bank had been "a willing pawn for the North Korean Government to engage in corrupt financial activities."
Governments in the region have identified incoming narcotics as having originated in North Korea, the INCSR says.
In 2003, Australia's seizure of 125 kilograms of heroin from the Pong-Su, a cargo vessel owned by a North Korean state enterprise, raised the possibility of state trading in drugs by the North Korean government. The trial of the ship's senior officers began in January 2005 and should be completed in 2006.
The Japanese government believes a significant amount of methamphetamine smuggled into Japan is refined and/or produced in North Korea. "There were no seizures of methamphetamines in Japan during 2005 linked to North Korea," the report acknowledges. But in past years, it says, "30 per cent to 40 per cent of methamphetamine seizures in Japan" have been linked to North Korea.
Methamphetamine manufactured in North Korea now may be identified as Chinese-source, the report notes, because ethnic Chinese criminal elements are working with North Korea in narcotics production and distribution, abroad and within China.
The 2006 INCSR is the 23rd annual report to be published in accordance with the Foreign Assistance Act of 1961. The report provides the factual basis for the designations contained in the president's report to Congress on major drug-producing and drug transit countries. A country's performance in controlling drug trafficking crimes is a factor in determining the assistance it will get from the U.S. government. (See related article.)
The full text of the two-volume 2006 International Narcotics Control Strategy Report is available on the Department of State Web site.
Following is the excerpt on North Korea from the INCSR:
U.S. Department of State
International Narcotics Control Strategy Report 2006
Released by the Bureau for International Narcotics and Law Enforcement Affairs
For decades, North Koreans have been apprehended trafficking in narcotics and engaging in other criminal behavior and illicit activity, including passing counterfeit U.S. currency and trading in copyrighted products. This year there were no public reports of specific incidents of narcotics trafficking with clear, demonstrable DPRK (Democratic People's Republic of Korea) links. However, given developments during 2005 that linked the DPRK to other forms of state-directed criminality, the Department reaffirms its view that it is likely, but not certain, that the North Korean government sponsors criminal activities, including narcotics production and trafficking, in order to earn foreign currency for the state and its leaders.
II. Status of Country
Substantial evidence exists that North Korean governmental entities and officials have laundered the proceeds of narcotics trafficking, counterfeit activities, and other illegal activities through a network of front companies, that use financial institutions overseas, for example in Macau, for their operations. On September 15, 2005, the U.S. Treasury Department designated Banco Delta Asia SARL in Macau as a "primary money laundering concern" under Section 311 of the U.S. Patriot Act, based on the finding that the bank represents an unacceptable risk of money laundering and other financial crimes. The U.S. Treasury Department noted that the bank "...has been a willing pawn for the North Korean Government to engage in corrupt financial activities through Macau." The Federal Register Notice on the designation cited "the involvement of North Korean Government agencies and front companies in a wide range of illegal activities, including drug trafficking and the counterfeiting of goods and currency" and specifically noted past arrests of North Koreans, including DPRK diplomats and officials, for narcotics trafficking and other criminal acts in twenty different countries since 1990.
In addition, indictments in the United States issued in 2005 and the ongoing work of several corporate investigative teams employed by the holders of major United States and foreign cigarette and pharmaceutical trademarks have provided compelling evidence of DPRK involvement in trademark violations carried out in league with criminal gangs around the world, including trafficking in counterfeit cigarettes and Viagra. The DPRK is also associated with production of high-quality counterfeit U.S. currency ("supernotes").
As reported in previous INCSRs, North Korean defectors and informants have long asserted that large-scale opium poppy cultivation and production of heroin and methamphetamine occurs in the DPRK. A defector identified as a former North Korean high-level government official wrote in a February 2004 "Jamestown Review" article that poppy cultivation and heroin and methamphetamine production were conducted in North Korea at the order of the regime. According to the article, the government engaged in drug trafficking to earn large sums of foreign currency unavailable to the regime through legal transactions. While this article and similar defector reports have not been verified by independent sources. Defector statements are consistent over the years and occur in the context of multiple narcotics seizures linked to North Korea and evidence of DPRK state entity involvement in other forms of criminality.
There were no seizures of methamphetamines in Japan during 2005 linked to North Korea. But 30 per cent to 40 per cent of methamphetamine seizures in Japan in past years have been linked to the DPRK. It is possible that methamphetamine manufactured in the DPRK is now identified as Chinese-source, because of the involvement of ethnic Chinese criminal elements working with the DPRK abroad, as well as within China, in the narcotics production/trafficking business.
The "Pong-Su" incident in Australia in April 2003 drew worldwide attention to the possibility of DPRK state trading of drugs. The "Pong Su", a sea-going cargo vessel owned by a North Korean state enterprise, was seized after reportedly delivering a large quantity of pure heroin to accomplices on shore. The trial of the "Pong Su" captain and other senior officers, including a DPRK Political Secretary, began in late January 2005; a verdict is expected in early 2006.
III. Country Actions Against Drugs in 2005
DPRK officials have ascribed past instances of misconduct by North Korean officials to the individuals involved, and stated that these individuals would be punished in the DPRK for their crimes. A 2004 edition of the North Korean Book of Law contains the DPRK's Narcotics Control Law. There is no information available concerning enforcement of this law or actions taken against North Korean officials and citizens involved in drug trafficking upon their return to North Korea.
IV. U.S. Policy Initiatives and Programs
The United States has made it clear to the DPRK that its involvement in a range of criminal and illicit activities, including narcotics trafficking, is unacceptable and must stop. The United States thoroughly investigates all allegations of criminal behavior impacting the United States by DPRK citizens and entities, prosecutes cases under U.S. jurisdiction to the fullest extent of the law, and urges other countries to do the same.
(Distributed by the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)
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